Amazon raising fees is not unexpected news. Amazon raises fees now and again for its different categories. It sometimes feels like Amazon raises fees constantly, although it doesn’t actually happen as often as sellers seem to think. Amazon raising fees is just another part of the greater Amazon experience, and something that sellers simply have to be prepared for and adjust to. That is, if they want to continue reaping the benefits of being part of the top online retail platform.
Amazon has not publicly confirmed or commented on the referral fee hike. An announcement was made in January, however, that Amazon raising fees for third-party sellers would take effect on April 15, 2018 for certain categories. This came just one month before the effectivity of another fee hike, this one for FBA, effective February 22nd.
Why is Amazon Raising Fees?
Amazon raising fees is not news, but the explicit reasons why is never made known. We have a good guess, however, why they targeted apparel. Amazon has been getting a big cut of third-party clothing and accessories sales. Both apparel and accessories has seen a lot of growth in recent years.
It may sound counter-intuitive to raise fees in these categories. Maybe so for the average retailer in this high-margin category. Yet these are the sellers who can best tolerate Amazon raising fees. Furthermore, Amazon raising fees is actually in the company’s best interest to encourage more luxury brands to enter the fold.
Currently, the bigger apparel brands are not comfortable selling most items through Amazon. Selling on such a marketplace negatively impacts their designer brand reputation. Many have chosen to compromise by selling only smaller or less sophisticated lines such as undergarments and t-shirts.
Amazon raising fees for apparel cuts both ways.
1. The marketplace stands to gain by taking a bigger cut on these basic items when they cannot encourage brands to bring in higher end collections. It also stands to gain by creating a selling atmosphere that is more conducive to luxury brands and designer collections. It’s important to also note here the fact that Amazon’s private labels brands are now the biggest threat to the top designer apparel brands. Amazon will always promote its own labels, but doesn’t want to alienate vendors.
2. Third party sellers may be discouraged from selling on Amazon because of the higher fees. This is still good for the marketplace since it only increases the prominence of Amazon’s own apparel offering. Moreover, Amazon is likely confident that apparel sells so well through the platform that sellers will keep selling. Despite Amazon raising fees, Amazon still provides the best data and search features. In addition, more than half of online shoppers buy clothing items from Amazon. And Amazon shoppers are loyal to the marketplace.
Amazon is raising fees for apparel, accessories, handbags and sunglasses effective April 15th at midnight, Pacific Standard Time. Third-party seller fees for jewelry, on the other hand, will be reduced come February 22nd at midnight PST, the same date that the new FBA fees take effect.
Clothing and Accessories
Third-party sellers will start paying 17% in referral fees for clothing and accessories. Amazon is also imposing a minimum of $1 per item. (Fees were previously 15%.) As it stands, Amazon raising fees means that apparel is now the most expensive category to sell in on Amazon.
Shoes, Handbags and Sunglasses
Sellers will be paying 15% to 18% in referral fees on eligible sunglasses, shoe and handbag items. The 15% cut applies to items with a total sales price up to $75, with the same minimum fee of $1. For items with prices greater than this, the fee increases to 18%. (Fees were previously set at 15%.)
Sellers of eligible jewelry items will still pay 20% on sales prices up to $250. For any portion of the total sales price above $250, the fee will be reduced to 5%. The minimum fee is $2 per item. This fee reduction applies only until February 21st of 2019, however. Thereafter, the fee will return to a steady 20% of the total sales price.
Be Prepared for Amazon Raising Fees
If you are selling apparel and accessories on Amazon, it’s time to start recalculating your margins. Perhaps the competition from Amazon’s apparel line hasn’t fazed you yet. Amazon raising fees by 2%-3% might be more than you are willing to tolerate. The marketplace customer loyalty, big data and evolved search advantages might still outweigh the burden of Amazon raising fees. You’ll never know until you crunch those numbers. And don’t forget to include projections for impending marketplace changes such as AR View and Amazon sales tax.